Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

The following table summarizes the carrying values and estimated fair value of our financial instruments at March 31, 2016 and December 31, 2015.



	March 31, 2016
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	106	$	106	$	106	$	—	$	—
Securities purchased under agreements to resell	779		779		—		779		—
Real estate secured receivables⁽¹⁾:
First lien	6,781		6,691		—		—		6,691
Second lien	1,652		1,126		—		—		1,126
Total real estate secured receivables	8,433		7,817		—		—		7,817
Real estate secured receivables held for sale	8,185		8,710		—		1,475		7,235
Due from affiliates	201		201		—		201		—
Financial liabilities:
Due to affiliates carried at fair value	495		495		—		495		—
Due to affiliates not carried at fair value	5,279		5,513		—		5,513		—
Long-term debt carried at fair value	1,447		1,447		—		1,447		—
Long-term debt not carried at fair value	6,055		6,453		—		6,453		—



	December 31, 2015
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	124	$	124	$	124	$	—	$	—
Securities purchased under agreements to resell	2,724		2,724		—		2,724		—
Real estate secured receivables⁽¹⁾:
First lien	7,237		7,174		—		—		7,174
Second lien	1,750		1,156		—		—		1,156
Total real estate secured receivables	8,987		8,330		—		—		8,330
Real estate secured receivables held for sale	8,265		8,668		—		—		8,668
Due from affiliates	128		128		—		128		—
Financial liabilities:
Due to affiliates carried at fair value	496		496		—		496		—
Due to affiliates not carried at fair value	5,429		5,693		—		5,693		—
Long-term debt carried at fair value	3,257		3,257		—		3,257		—
Long-term debt not carried at fair value	6,253		6,664		—		6,664		—

⁽¹⁾

The receivable held for investment carrying value included in this table reflects the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and includes certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. The receivable held for investment carrying value included in this table also includes accrued finance charges and is net of credit loss reserves. However, the basis adjustments on the loans, accrued finance charges and credit loss reserves are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivables held for investment account balances.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following table presents information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting⁽¹⁾			Total of Assets (Liabilities) Measured at Fair Value
	(in millions)
March 31, 2016:
Derivative financial assets:
Interest rate swaps	$	—	$	24		$	—	$	—		$	24
Currency swaps	—		144			—		—			144
Derivative netting	—		—			—		(168		)	(168		)
Total derivative financial assets	—		168			—		(168		)	—
Total assets	$	—	$	168		$	—	$	(168	)	$	—
Due to affiliates carried at fair value	$	—	$	(495	)	$	—	$	—		$	(495	)
Long-term debt carried at fair value	—		(1,447		)	—		—			(1,447		)
Derivative related liabilities:
Interest rate swaps	—		(399		)	—		—			(399		)
Currency swaps	—		(292		)	—		—			(292		)
Derivative netting	—		—			—		691			691
Total derivative related liabilities	—		(691		)	—		691			—
Total liabilities	$	—	$	(2,633	)	$	—	$	691		$	(1,942	)
December 31, 2015:
Derivative financial assets:
Interest rate swaps	$	—	$	24		$	—	$	—		$	24
Currency swaps	—		111			—		—			111
Derivative netting	—		—			—		(135		)	(135		)
Total derivative financial assets	—		135			—		(135		)	—
Total assets	$	—	$	135		$	—	$	(135	)	$	—
Due to affiliates carried at fair value	$	—	$	(496	)	$	—	$	—		$	(496	)
Long-term debt carried at fair value	—		(3,257		)	—		—			(3,257		)
Derivative related liabilities:
Interest rate swaps	—		(304		)	—		—			(304		)
Currency swaps	—		(379		)	—		—			(379		)
Derivative netting	—		—			—		626			626
Total derivative related liabilities	—		(683		)	—		626			(57		)
Total liabilities	$	—	$	(4,436	)	$	—	$	626		$	(3,810	)


⁽¹⁾	Represents counterparty and swap collateral netting which allow the offsetting of amounts relating to certain contracts when certain conditions are met.

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis

The following table presents information about our assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2016 and 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Certain of the fair values in the table below were not obtained as of March 31, 2016 or 2015 but during the periods then ended. See Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," in our 2015 Form 10-K for discussion of our policy in measuring fair value.



	Non-Recurring Fair Value Measurements as of March 31, 2016								Total Gains (Losses) for the Three Months Ended March 31, 2016
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	1,299	$	6,886	$	8,185	$	(68	)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell⁽¹⁾	—		274		—		274		(26		)
Real estate owned⁽²⁾	—		80		—		80		(5		)
Total assets at fair value on a non-recurring basis	$	—	$	1,653	$	6,886	$	8,539	$	(99	)



	Non-Recurring Fair Value Measurements as of March 31, 2015								Total Gains (Losses) for the Three Months Ended March 31, 2015
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	333	$	764	$	1,097	$	(17	)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell⁽¹⁾	—		529		—		529		(72		)
Real estate owned⁽²⁾	—		186		—		186		(4		)
Total assets at fair value on a non-recurring basis	$	—	$	1,048	$	764	$	1,812	$	(93	)


⁽¹⁾	Total gains (losses) for the three months ended March 31, 2016 and 2015 include amounts recorded on receivables that were subsequently transferred to held for sale.


⁽²⁾	Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value of the underlying asset unadjusted for transaction costs.

Fair Value Inputs, Assets, Quantitative Information

The following table presents quantitative information about non-recurring fair value measurements of assets and liabilities classified as Level 3 in the fair value hierarchy as of March 31, 2016 and December 31, 2015:



	Fair Value						Range of Inputs
Financial Instrument Type	Mar. 31, 2016		Dec. 31, 2015		Valuation Technique	Significant Unobservable Inputs	March 31, 2016				December 31, 2015
	(in millions)
Receivables held for sale carried at the lower of amortized cost or fair value:
Real estate secured	$	6,886	$	8,265	Third party appraisal valuation based on	Collateral loss severity rates⁽¹⁾	0	%	-	100%	0	%	-	100%
					estimated loss severities, including collateral values, cash flows and	Expenses incurred through collateral disposition	5	%	-	10%	5	%	-	10%
					market discount rate	Market discount rate	4	%	-	14%	4	%	-	14%

⁽¹⁾

As discussed below, as a result of our decision in 2015 to expand our receivable sales program, we added additional pools to our fair value estimation process in line with the new risk characteristics that now exist in the expanded receivables held for sale portfolio. At March 31, 2016 and December 31, 2015, the weighted average collateral loss severity rate was 43 percent and 42 percent, respectively, taking into consideration both expected net cash flows as well as current collateral values.